Government and small business are not always the best of
friends, but once in a great while, the two manage to collaborate
in a way that opens new doors of opportunity. One shining example
of a great program born from the government is ACE-Net, which helps
small businesses find what they otherwise could not easily find on
their own.

In fact, ACE-Net--the Angel Capital Electronic Network--is one
of the best places for entrepreneurs to start their search for
angel capital. Since its launch in 1995, ACE-Net has helped
entrepreneurs raise over $100 million.

ACE-Net, however, had its share of growing pains over the past
10 years. After the SBA gave up its central role in the
organization in 2000, the ACE-Net website seemed to be more or less
abandoned and neglected.

Neglected, that is, until early 2004, when the directors of
ACE-Net asked Phil Borden to take the helm as CEO. Borden, a former
UCLA professor, serial entrepreneur and small-business finance
expert, has since breathed new life into the online entrepreneur
equity-matching service with a grand vision and a host of new
benefits for entrepreneurs.

A Brand-New Brand

The new and improved ACE-Net bears a new name, Active Capital,
and a new
URL. Any entrepreneur seeking equity partners should consider
stopping by.

Ironically, Active Capital's primary advantage stems from a
"No-Action Letter" from the SEC. This document
essentially allows Active Capital to operate an interstate matching
service for entrepreneurs and investors, so long as they stay
within some very specific guidelines.

"The SEC says that the actual operations must take place in
either a university or a nonprofit corporation," says Borden.
"What they don't want is a bunch of consultants running
the show."

By keeping the operations within a university or a nonprofit
entity, the SEC hopes to avoid the potential for fraud and
deception. While brokers and other consultants typically provide
value by being in the middle of a transaction, Active Capital does
exactly the opposite: it provides only direct contact between
entrepreneurs and accredited investors, thus avoiding any unfair
influence over either party.

"The investor has a safe harbor because all the statements
made about the company come from the entrepreneur," says
Borden. "That's important because it makes the deal fair,
and [only] between the entrepreneur and the investor. We, as the
middlemen, stay out of the loop."

Online Matchmaking

Borden compares the new Active Capital to a dating service.
"We make no comments about your warts or your beauty--we
simply pass along the information," he quips. By making the
process direct and free from influence, Active Capital accomplishes
something else--something even more important to entrepreneurs: It
eliminates the need to register the equity offering with state
regulators. This is a critical benefit to entrepreneurs because
state regulators have just as much authority over funding
transactions as the SEC. The online registration process exempts
you from having to register separately with each state.

Legislative compliance, especially multistate compliance, says
Borden, is one of the most elusive aspects of raising money.
"People aren't trying to avoid the law; they just
don't know it. It's securities law, and it's
complicated."

Entrepreneurs who solicit investors outside their circle of
friends, or outside their own state, can run afoul of state
"blue sky" laws. Active Capital, however, allows
entrepreneurs to promote their opportunities to and raise money
from investors in almost any state. "Normally, you'd have
to register with state regulators in each state in which you raise
money. You can spend $10,000 to $50,000 in each state to
register," Borden says. "But Active Capital gets you
around all that."

This seemingly impossible task is possible because one of the
organization's original accomplishments was harmonizing
multiple state regu-lations, creating what is now called the
"model accredited investor exemption." According to
Borden, 40 states now accept this definition of accredited
investors. And since Active Capital accepts only accredited
investors, entrepreneurs can reach out to investors almost anywhere
in the country with relative impunity. "Now," says
Borden, "if you live in Kansas City, you don't have to
worry about whether your investor lives in Kansas or
Missouri."

Behind the Scenes

When he's not worried about the vagaries of legal
compliance, Borden is busy building alliances and support for
Active Capital from business leaders across the country. He's
assembled a strong board of directors, including members such as
Entrepreneur magazine's own editorial director, Rieva
Lesonsky, as well as well-known venture capitalists Amy Millman of
Springboard Enterprises and Don Jacobs of Consortium Innovation
Centers.

All this ought to be enough to drive entrepreneurs to the Active
Capital website in droves. For those who need more convincing,
Borden says there are other offerings, including news feeds from
Entrepreneur and other small-business sources, and
video-based tutorials on raising capital and growing
businesses.

"We're in the midst of producing 15-minute videos
specifically on how to prepare a business for angel funding,"
says Borden. "If they want to go through the whole course of
40 videos, we'll certify them and guarantee them that an angel
will look at their plan."

One last tool available online is an analytic tool that enables
entrepreneurs to see what kinds of SEC exemptions they qualify for
according to several factors, including their state, growth stage,
and rate and exit plans. "We're providing an analytic tool
so people know what the regulations are in each state. You'll
come on and answer some questions about your opportunity, and
depending on what kind of capital you're looking for, we'll
be able to tell you what your options are for raising money in your
region," says Borden.

The reborn Active Capital is still in its infancy. Having
replaced the original ACE-Net website just a few months ago, the
new site will continue to build on Borden's vision. Says
Borden, "We have a development plan for the website that will
continue to increase in sophistication in the coming
years."

David Worrell is an investment banker and author of the
e-book Finding Funding.